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Extending CHIP Would Actually Save Taxpayers Money: CBO

By Michael Rainey

January 11, 2018

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The Congressional Budget Office produced a new cost estimate for extending the Children’s Health Insurance Program, finding that a 10-year extension would produce net savings of $6 billion. An analysis by the CBO last week found that a five-year CHIP extension would cost $800 million, substantially less than previous estimates.

How could spending money on children’s health care result in net savings in the long run? CBO says the alternatives are more expensive: “the federal costs of the alternatives to providing coverage through CHIP (primarily Medicaid, subsidized coverage in the marketplaces, and employment-based insurance) are larger than the costs of providing coverage through CHIP during that period.”

The dynamics involved are complicated, and include the effects of eliminating the Obamacare individual mandate as well as reductions in the federal matching rate for CHIP that kick in over time, but the CBO’s conclusion is getting attention in Congress, which has been unable to agree on how to fund the program. House Energy and Commerce Committee Chairman Greg Walden (R-OR) said he plans to bring a six-year extension of CHIP to the floor for a vote next week. “If we go to six years, it may have no cost,” Walden said Thursday, referring to the CBO analysis, which shows a breakeven point at about the six-year mark (see the table here).

The extension could be attached to a short-term funding bill that must pass before January 19.